Sugar Stocks Turned Sweeter As Sugar Prices Surged

Dynamic Equities | June 13, 2017, midnight

Sugar price has hit the highest level in seven years following sudden pick up in lifting from bulk consumers and lower production estimates this season. Gradually approaching towards Rs 40 per kg in the wholesale Vashi market, the benchmark Sugar M 30 variety closed at Rs 39.35 per kg on Tuesday. The sweetener has jumped by over 3 per cent in the last 10-days. Ex-mill sugar prices, which plunged by Rs 2 to 3 per kilo since the second week of November 2016 after demonetization, have started improving and are now at the levels seen a couple of years ago.

Why the rise?

Post demonetization, lifting of sugar from bulk consumers, like ice cream and soft drink makers, slowed down resulting in a sharp fall in sugar prices. However recently, trade sources say there has been a sudden surge in off-take by bulk consumers that has pushed the prices up.

Abinash Verma, Director General, Indian Sugar Mills Association (ISMA)has said in a recent report that with higher cane price announced by states of Uttar Pradesh, Punjab and Haryana, low sugar recovery being attained in the Tamil Nadu, Andhra Pradesh and other states, and lower capacity utilization in drought-affected areas of Maharashtra, Karnataka and Telangana, the all-India average cost of production of sugar during the current 2016-17 Sugar Season, will nearly be higher at around Rs 35 to 36 per kilo which is Rs 2 more than the previous year’s cost of production.

With lower off-take and sugar consumption in 2016-17, sugar stocks at the end of the current season may be higher than what was projected earlier, by 0.5-1.0 million tons. ISMA will carry out its second advance valuation for sugar production in 2016-17, later this month, based on satellite images.

Mr. Verma also said that Sugar mills should be permitted to recover at least their costs during the current season, or else, they would not be in the situation to make payments to farmers on time and would also not be in a position to repay the loans taken from Government of India including those under SEFASU and soft loans, which are due to be repaid this year.+++++

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